Correlation Between IShares 0 and US Treasury

Can any of the company-specific risk be diversified away by investing in both IShares 0 and US Treasury at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares 0 and US Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 0 3 Month and US Treasury 6, you can compare the effects of market volatilities on IShares 0 and US Treasury and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares 0 with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 0 and US Treasury.

Diversification Opportunities for IShares 0 and US Treasury

1.0

Correlation Coefficient

IShares 0  US Treasury

No risk reduction

The 3 months correlation between IShares and XBIL is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares 0 3 Month and US Treasury 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 6 and IShares 0 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares 0 3 Month are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 6 has no effect on the direction of IShares 0 i.e., IShares 0 and US Treasury go up and down completely randomly.

Pair Corralation between IShares 0 and US Treasury

Given the investment horizon of 90 days iShares 0 3 Month is expected to generate 0.55 times more return on investment than US Treasury. However, iShares 0 3 Month is 1.81 times less risky than US Treasury. It trades about 1.39 of its potential returns per unit of risk. US Treasury 6 is currently generating about 0.73 per unit of risk. If you would invest  9,962  in iShares 0 3 Month on December 28, 2024 and sell it today you would earn a total of  105.00  from holding iShares 0 3 Month or generate 1.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares 0 3 Month  vs.  US Treasury 6

iShares 0 3

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 0 3 Month are ranked lower than 96 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares 0 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

US Treasury 6

Risk-Adjusted Performance

Market Crasher

Over the last 90 days US Treasury 6 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares 0 and US Treasury

The main advantage of trading using opposite IShares 0 and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 0 position performs unexpectedly, US Treasury can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in US Treasury will offset losses from the drop in US Treasury's long position.

The idea behind iShares 0 3 Month and US Treasury 6 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.